Market Happenings for Thursday, July 28, 2011

Pre-market futures are up a bit but investors are worried about the impending debt ceiling deadline, and lawmakers have shown little evidence they are moving closer to a deal. Gainers this morning include LSI, BSX, GT, MJN and ROK. Losers include AKAM, S, TER, LIFE and IPG.

U.S. Stock News

September S&Ps this morning are trading slightly lower by 1.10 points as debt ceiling concerns continue. Amazon rallied sharply by about 7% in after-hours trading on Tuesday on the release of stronger-than-expected Q2 EPS and favorable Q3 guidance. The US stock market on Tuesday continued lower as the debt ceiling battle dragged on: Dow Industrials -0.73%, S&P 500 -0.41%, Nasdaq Composite -0.10%. The stock market continued lower due to the outside possibility that the debt ceiling may not be lifted by Tuesday’s August 2 deadline. However, the stock market received underlying support from positive Q2 earnings reports and yesterday’s 13-tick rally in Sep 10-year T-note prices.

The Markets

September 10-year T-notes this morning are up 3.5 ticks on weakness in U.S. and European stocks. T-note prices on Tuesday closed higher as the market became more concerned about the economic fallout from the debt ceiling debacle: TYU11 +13, FVU11 +8.25, EDZ11 +0.005. Tuesday’s 2-year T-note auction saw good demand despite paltry yields, suggesting that investors still view Treasury securities as a good safe-haven vehicle despite the best efforts of Congress to convince them otherwise. The 2-year saw a relatively strong bid-cover ratio of 3.22 and decent foreign participation with indirect bidders taking 34.5% of the auction, close to the 12-auction average of 35.1%.

The dollar index this morning is trading mildly higher by 0.134 with USDJPY down 0.10 yen and EURUSD down 0.42 cents. The dollar this morning is seeing a little short-covering after the sharp sell-off in the past two weeks and is also getting some support on the euro-negative news of rising Spanish and Italian bond yields. The dollar closed lower on Tuesday: Dollar Index -0.59, USDJPY -0.41, EURUSD +0.0134. The visibility of the U.S. debt ceiling spectacle in overseas markets was raised by President Obama’s televised address Monday night and his plea for compromise. Foreign investors responded by lightening up on their U.S. investments considering that the U.S. fiscal problems are going to remain on track to disaster even when the debt ceiling hike is over.

Sep crude oil prices this morning are trading lower by $0.73 a barrel and Sep gasoline is down 0.40 cents per gallon on concerns about economic fallout from the debt ceiling battle. Crude oil and gasoline prices on Tuesday closed moderately higher: CLU11 +0.39, RBU11 +0.0079. Bullish factors included the weak dollar, news that gasoline inventories fell 639,000 barrels in the weekly API report, and technical buying as gasoline broke out to a new 2-1/2 month high. The petroleum market on Tuesday was at least temporarily able to shake off worries about economic damage from the debt ceiling battle. The market consensus for today’s weekly DOE report are for a 1.75 million barrel drop in crude oil inventories, a 125,000 barrel increase in gasoline inventories, a 1.6 million barrel increase in distillate inventories, and a 0.3% drop in the operating rate.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): COP-Connoco-Phillips (BEST earnings consensus $2.21), V-Visa (1.23), BA-Boeing (0.97), DOW-Dow Chemical (0.79), SO-Southern Co (0.64), PX-Praxair (1.37), EXC-Exelon (0.95), GLW-Corning (0.47), WLP-Wellpoint (1.80), GD-Genderal Dynamics (1.72), HES-Hess (1.97), NEE-Nextera Energy (1.08), TMO-Thermo Fisher (0.98), AFL-Aflac (1.54), EQR-Equity Residential (0.08), NOC-Northrup Grumman (1.67), AET-Aetna (1.08).

Financial Calendar

0700 ET Weekly MBA mortgage applications, last market index +15.5% with purchase mortgage sub-index -0.1% and refinancing sub index +23.1%.

0830 ET Jun durable goods orders expected +0.3% and +0.5% ex transportation, May +2.1% and +0.7% ex transportation.

1300 ET Treasury auctions $35 billion 5-year T-notes.

1400 ET Fed?s Beige Book.

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